Peak Nothing: Goldman Sachs Advisor Says “Too Much Physical Oil” Could Send Prices Plummetting
Mac Slavo
February 12th, 2015
SHTFplan.com
Goldman Sachs executive Gary Cohn says we could see so much oil, there would be no way to physically store it all, resulting in falling prices, at least in certain locational areas.
Further destabilization across the globe could, logically, follow.
Cohn told Bloomberg News:
“I think the oil market is trying to figure out an equilibrium price. The danger here, as we try and find an equilibrium price, at some point
we may end up in a situation where storage capacity gets very, very limited. We may have too much physical oil for the available storage in certain locations. And it may be a locational issue.”
“And you may just see lots of oil in certain locations around the world where oil will have to price to such a cheap discount vis-a-vis the forward price that you make second tier, and third tier and fourth tier storage available.”
[…] “You could see the price fall relatively quickly to make that storage work in the market.”
And though prices have recently rebounded a bit, that could well mean prices below the $50 per barrel low point that has already shaken the foundation of the geopolitical structure, sending the ruble and other currencies into chaos while threatening new drilling operations and job bases in the United States.
The big culprit in the oil crash has been an abundance of oil flooding the market. A massive supply shock in the second half of last year accounted for most of the decline. In December and January, slowing demand contributed to the continued sell-off. Goldman was able to quantify these effects.
The big take-away: “[T]he decline in oil has been driven by an oversupplied global oil market,” wrote Goldman economist Sven Jari Stehn. As a result, “the new equilibrium price of oil will likely be much lower than over the past decade.”
The Rest…HERE
